Sunday, July 12, 2015

Even some of those Greeks who voted for Syriza last year must have started to get a sense of reality emerging that for all of the bluster and bragging of Alexis Tsipras, he himself has capitulated to what he once thought of as "neo-liberal hegemony".

Tsipras, and Varoufakis (the not so lamented "rockstar" Finance Minister, embraced by the airhead media) said they opposed "austerity" (a leftwing pejorative for balancing the budget), and were elected on the platform.

However, now Tsipras (having removed Varoufakis) has gained parliamentary support for raising a lot of taxes, increasing the pension age, some modest spending cuts and privatisation of ports and airports to seek a third, yes third, bailout with Greece's Eurozone partners. The problem for Tsipras is that other Eurozone countries are losing patience, and it is more the Finns, Slovaks and Baltic States that are fed up with Greece, than the Germans.

Why?

Because many Eurozone countries don't trust the Greek Government.

The first bailout saw Greece granted loans between 2010 and 2012 of 107 billion yes billion, Euro on condition that Greece would get its budget deficit down to 3% of GDP by 2014. Part of this deal was to end the practice of paying public servants two more months of pay a year every year. Yes, public servants would get a bonus of an extra two months' salary every year.

The second bailout saw 50% of Greece's debts with private bondholders written off and the remaining debt on an interest rate of 3.5% (so much for the rhetoric about the evil foreign bankers profiteering), knocking 100 billion Euro off of Greece's debt. Again, the Greek government was expected to cut its budget deficit, which it did, somewhat.

However, the extent of reforms of the Greek economy that were expected simply didn't happen. State pensions for "dangerous professions" such as hairdressing (yes really) were still paid out at age 50. Defence spending exceeded the 2% of GDP expected for being a member of NATO (and there was little scrutiny of where that money went). In short, Greece maintained big government, corporatist for the centre-right, large public sector for the centre-left, but little welfare state besides pensions.

Syriza got elected promising an end to "austerity" that was part of the deal for the two previous restructurings of public debt, but found no appetite at all to do this. After all, why would other governments expect their taxpayers to pay for Greece to continue its corrupt, unreformed bloated inefficient state?

So Syriza embarked on two rather vile strategies to frighten the Eurozone. One was to start talking about the war - World War Two that is - saying Germany hadn't compensated Greece "enough" for the war, and besides Greece wrote off some debt owed to it by Germany in the 1950s (as did most Western European states). As a strategy to get the Germans on side, it was beyond parody and as a strategy to get European sympathy it was childish. After all, was Greece truly saying that it, especially, should get some of that money back from Germans who were mostly not born at the time? Quite rightly, Eurozone member states that ended up on the wrong side of the Iron Curtain sniffed at this anti-German nonsense. After all, they all spent 40 years under the yoke of the USSR and its local tyrants, and couldn't even consider demanding Moscow compensate them.

After German bashing backfired, Alexis Tsipras went to visit Vladimir Putin. The implication was simple - If the West doesn't support our unreformed bloated socialist/corporatist state, we'll turn to Russia. The implication did cause a few ructions in Washington, as it could have meant Greece abandoning NATO, but even Putin didn't want Greece. With global oil prices and EU sanctions hurting Russia, Putin smiled and knew not only that he couldn't afford Greece, but that such a move would be unnecessarily antagonistic. So Tsipras ran back with his tail between his legs.

Now he has tried his latest trick. He opposed a proposed bailout. He held a referendum and convinced Greeks to oppose the bailout, then found out that the banks were running out of liquidity.

So the Greek government did the usual desperate move of any authoritarians. It restricted the amount individuals could withdraw from their own bank accounts. It effectively banned imports (within a customs' union and currency union!) by imposing exchange controls, and closed the banks for a week.

Now he wants a new bailout, he is proposing tax increases to more than correspond with the deal he rejected, and other Eurozone countries (except the socialist sympathising French and Italians) are uninterested. Countries with lower per capita GDP than Greece, with lower debt, and smaller states, that faced bigger economic challenges (with the collapse of their communist bloc economies) are uninterested in a government that lies, that blackmails and has no contrition that the main problem is past Greek governments overspending.

Having dug up the past, having flirted with Putin, having opposed budgetary responsibility and now apparently supporting higher taxes (which will hurt the economy much more comprehensively than cutting back the massively bloated public sector), and privatisation, but few are interested.

The right response of the Eurozone is to say no. To tell Greece that if it wants to save its banks, it needs to live within its means, default on privately held bonds if it wishes and expect not to borrow any more. The xenophobic socialists that are governing Greece are the philosophical descendants of those who fought on the Soviet side in the Greek civil war. Had they won then, Greece's fate would have looked a lot like Bulgaria and Albania to its north. It would be nice if some in Greece realised how much they are to be grateful for and face down the rent seekers of the state that are holding their country back.

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About Me

Life, liberty and the pursuit of happiness. Politics, philosophy and economics from a pro-capitalist, libertarian, objectivist perspective. Born in New Zealand, live in the UK, career has been in transport, telecommunications and infrastructure policy.